Navigant Research Blog

Navigant Consulting works with the U.S. Department of Energy’s (DOE’s) Better Buildings Alliance (BBA) to understand barriers and solutions to promoting solar PV adoption. Currently, we are focusing on solar PV on leased buildings. We have teamed with the SunShot Initiative to develop a request for information to better understand the barriers, benefits, and solutions to installing solar on leased buildings. We are encouraging those active in the solar industry to voice their opinions so that we can develop tool to meet the market’s needs.

Why Leased Buildings?

As of 2012, there were 5.6 million commercial buildings in the United States, comprising 87 billion SF of floor space and representing a huge sustainability and clean energy opportunity. However, a large portion of these buildings are multi-tenanted leased spaces facing a split incentive in that the building owner does not typically pay the energy bills, but would bear the upgrade costs. A number of green leasing initiatives have developed concepts, tools, and guides to overcome this barrier for energy efficiency, but have not focused on solar PV. As a result, Navigant is focusing on this issue in 2015.

Benefits of Solar PV

In many cases, solar PV benefits both the landlords and tenants; however, the division of the economic and environmental benefits depends on the structure of the building lease. The lists below demonstrate the potential benefits.

Demonstrates environmental responsibility to employees and the community

In general, for commercial buildings, reducing operating expenses through the installation of a PV system can provide a hedge against escalating energy prices. Buildings may see lower costs of capital and higher market value because of this reduced risk. Depending on how the lease is structured, some or all of these benefits can lead to increased revenue for the building owner. Additionally, solar helps diversify revenue streams, reducing the overall volatility of the property’s income.

Barriers to Solar PV

A number of factors affect the growth of the commercial solar market, with the greater obstacles being the lack of project standardization and high transaction costs. Within the commercial real estate market, owner-tenant facilities in particular have an added level of complexity:

Split incentive: Energy costs often paid by tenants and solar PV system is purchased and owned by building owner

Short payback requirement: Building owners want 2- to 3-year payback

Timeframe discrepancy between building lease and solar PV system life: Solar PV system has a 20- to 25-year life, which is often longer than building leases

While many barriers to installing solar PV on leased buildings exist, companies are developing innovative solutions to address or overcome these challenges. The figure below summarizes the ideas by system ownership. Navigant Consulting is currently working with the DOE and BBA on a guide summarizing these strategies, and it will be available later this summer.

Smart grid deployments in Latin America have struggled to gain traction in recent years compared to North America or Europe. But that is starting to change. Significant projects in two countries—Brazil and Mexico—are moving ahead, with vendors being selected in recent weeks.

Brazil

Eletrobras, Brazil’s leading electric utility, has chosen several technology vendors for a smart grid project that involves six of the utility’s distribution subsidiaries. The utility selected Itron’s new OpenWay Riva solution that enables a single network to support two communications technologies (radio frequency and power line carrier) in the same device. The result is an adaptive system that can dynamically choose the best path for communicating based on network conditions, type of data, or application requirements. The solution is supported by Cisco’s IPv6 network infrastructure.

Other vendors selected for the Eletrobras project include Siemens, Telefónica, and Telemont. Approximately 115,000 endpoints are expected to be deployed at the six subsidiaries in the states of Alagoas, Piaui, Acre, Rondonia, Roraima, and Amazonas. The goal of the project is to reduce theft of service, a chronic problem in Brazil. Full implementation of the project is expected to be complete in 2017.

Mexico

In Mexico, Comisión Federal de Electricidad (CFE), the state-owned electric company, has selected a number of vendors for its smart grid project in Mexico City’s Central District. Silver Spring Networks was chosen to provide its IPv6 network, which enables connectivity to cabinets that house a group of centralized meters. In addition, vendors chosen to support the project include Elster and Tecnologias EOS. Elster will provide its EnergyAxis software and field network devices in addition to its REX2, A3 ALPHA, and mREX2 smart meters. A total of 300,000 meters are expected to be deployed, according to Elster. Similar to Eletrobras, the goal of CFE’s project is to reduce theft of service, which can be substantial. Nearly 15% of CFE’s total electricity production was lost due to theft or defaults in 2013, according to the utility, and in some areas of Mexico City, that figure surges to more than 35%.

Theft Reduction and More

Clearly, the main driver for smart grid deployments in these two projects is the same: theft reduction. But beyond that, the technologies being deployed lay a foundation for additional smart grid applications. For instance, Eletrobras has indicated it will add outage detection and analysis along with improved transformer load management. And while these two projects do not necessarily portend a wave of similar deployments, they do represent a next step toward grid modernization by leading utilities and are likely to be imitated by others across Latin America in coming years.

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Armed with years of data, utility industry officials are highlighting some of the results from the most ambitious smart grid demonstration project in the United States. One of the key lessons they learned is how difficult it can be to use the latest smart grid hardware to consistently produce high quality data.

That was the conclusion noted recently by Ron Melton, the director of the Pacific Northwest Smart Grid Demonstration Project and a senior leader at Pacific Northwest National Laboratory (which is operated by Batelle). Launched in 2010, the demo was federally funded under the American Recovery and Reinvestment Act (ARRA) at a cost of $178 million, making it the largest single project of its kind. It included five states—Oregon, Washington, Idaho, Montana, and Wyoming—comprising some 60,000 metered customers, 11 utilities, two universities, and assets in excess of 112 MW. The goal was to test a broad range of ideas and strategies to see if a regional smart grid could lower energy consumption and increase reliability.

Lacking Tools

One of the broad lessons for utilities is that the tools and skills to manage the huge volume of data from smart meters and sophisticated sensors on the grid are largely nonexistent, according to Melton. But it goes beyond merely managing data; the real challenge is to get consistently good data to ensure that sensors across the grid are working properly and that key operating decisions can be made based on reliable high-quality information.

Transactive Control

One of the core technologies used in the project is called transactive control, which in essence is two-way communications between electricity generation and end-use devices, such as electric water heaters, furnaces, clothes dryers, etc. The control signals communicate the price of delivering power to that device at a specific time, and the device can decide when to use electricity—with the owner’s consent, of course. This is the underlying technology for demand response (a topic discussed in detail in Navigant Research’s report, Demand Response Enabling Technologies). Project managers were able to show that transactive control works and could theoretically reduce 4% of peak power costs in the Pacific Northwest. But, as Melton says, this would require about 30% of demand on the system to be able to respond in this way. To get there will take a concerted effort to clearly show the value streams to all parties and then figure out the financial incentives.

Clearly, utilities are still in the early phase of the smart grid and handling big (and small) data in new ways is often uncharted territory. Nonetheless, this demo highlights the framework on which the future grid—what we at Navigant Research see as the energy cloud—will be built, and the steps necessary as the grid of tomorrow emerges.

Separating energy use in a home down to the appliance level for improving efficiency has long been a goal of technology vendors and utilities alike—some call it a holy grail. The latest effort by California utility Pacific Gas & Electric (PG&E) and partner Bidgely yielded up to 7.7% energy savings among some 850 participants in a pilot program. The results were announced recently and highlight one of several methods aimed at energy load disaggregation.

The PG&E-Bidgely pilot lasted from August through December of last year. Customers who took part were given an in-home energy monitor that gathered real-time electricity consumption data from a smart meter and broke it down by device. For example, the amount of usage by an air conditioner, refrigerator, pool pump, or clothes dryer was broken out along with a cost estimate. The Bidgely system then provided updates and alerts to customers through online access or mobile devices. Armed with this data, customers could take steps to reduce their consumption, such as delaying a dryer cycle until rates were lower or adjusting the air conditioner (AC).

Points of Entry

Other vendors in this space, like PlotWatt and Smappee, offer to analyze and interpret energy consumption down to the appliance level, as well. Both offer ways of detecting appliance-level consumption and utilize a separate device to do so. But unlike Bidgely, these companies are not focused on utilities as their market point of entry. PlotWatt aims its service at residential customers and restaurants, while Belgium-based Smappee is going direct to consumers for now.

The other big player working to help utilities’ customers reduce consumption is Opower. Though it does not disaggregate household load, its programs do help residential customers change their behavior to reduce consumption. Opower programs have shown that energy use can be reduced by 1% to 3%. In behavioral demand response programs, peak demand has been lowered by up to 5%.

Mainstreaming

For its part, Opower has been able to convince dozens of utilities to deploy its solution at scale among millions of end users. The challenge for Bidgely and the disaggregation competitors is this issue of scale. Can they also provide insights and help change user behaviors across a large number of customers? These latest results are promising, and Bidgely has expanded with projects at Texas utility TXU and London Hydro in Canada. As noted in Navigant Research’s report, Home Energy Management, there is growing momentum and consumer awareness around the latest tools for reducing energy use. The trick will be in sustaining this momentum and moving beyond early adopters and into the mainstream.